LONDON: Standard Life Investments Ltd., Edinburgh’s biggest money manager, is putting its money on faster inflation in the U.S. than the U.K., where it sees price pressures remaining subdued.
“Our favorite overweight would be the U.S. in terms of the inflation markets,” Adam Skerry, a money manager at Standard Life Investments in the Scottish capital, said in a telephone interview. An overweight position is one in which an investor holds a bigger percentage of a security than is contained in the indexes used to monitor performance.
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U.K. inflation-linked government bonds handed investors a 2.6 percent loss in the week through June 5, erasing a 2.5 percent gain made in the first five months of 2015, according to Bank of America Merrill Lynch indexes. Treasury Inflation Protected Securities, or TIPS, lost 1.9 percent last week after underperforming their U.K. peers this year.
Evidence of the diverging prospects for the U.S. and U.K. was underpinned last week by a stronger-than-expected jobs report in the world’s largest economy, which increased investor wagers on U.S. inflation by the most in more than two months on Friday, according to break-even rates. Separate reports last week showed U.K. manufacturing and housing data trailed behind analysts’ forecasts, dimming prospects of a sharp turnaround after consumer prices dropped in April.
Standard Life Investments, which oversees about $376 billion, is “neutral” on U.K. linkers and doesn’t see “much scope for inflation to pick up that dramatically” in the euro area, Skerry said.
